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conversation of agriculture land into commercial property

09 October 2017

I have agriculture land from my father without any cost and now I have converted this land into commercial property and make shops on this property and sale the shops. Will be there capital gain and what will be the cost of acquisition. What will be the treatment of this situation

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11 Replies

saurav joshi (article) (45 Points)
Replied 09 October 2017

it depends whether it is urban or rural agricultural land
and whether it is your business to make and sale commercial property.

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CHETAN JANGID (95 Points)
Replied 09 October 2017

It's rural agriculture land. And it's not our business

saurav joshi (article) (45 Points)
Replied 09 October 2017

As you know rural agricultural land if not an 'Capital asset' but when you sale property the capital gain will arise and to determine whether that going to be short term or long term, in my point of view :-
a) As you convert agricultural land for any other purpose it become 'Capital asset' and Cost of acquisition (COA) shall be the purchase price of the land.
b) but period of holding shall be determined from the date of conversion as till that date it was not an capital asset.
c) therefore if you sale that after 3 years from conversion it will be long term capital gain otherwise short term capital gain will arise.

CHETAN JANGID (95 Points)
Replied 09 October 2017

Agree n thanks.

CHETAN JANGID (95 Points)
Replied 09 October 2017

But what will be the cost of acquisition. Because it's received from father free of cost. Means it is received as succession.

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saurav joshi (article) (45 Points)
Replied 09 October 2017

The case of Manjula j. Shah (Bom) (2013) will apply and cost of acquisition (COA) shall be COA to your father if that not available then COA to person before them.

saurav joshi (article) (45 Points)
Replied 09 October 2017

Sorry i didn't saw succession i quoted case in case as if you received it as a gift from your father. but in the both cases the answer will remain same.